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Monday, June 14, 1999 Published at 13:59 GMT 14:59 UK

Business: The Economy

Japan acts to stem rise of yen

The Bank of Japan wants the right conditions for economic recovery

The US dollar shot up against the yen on Monday when Japan's central bank bought up dollars to slow a rise in the Japanese currency.

A stronger yen is a threat to the exporters that power Japan's economy because it makes their goods more expensive overseas, which could be dangerous to their economy as it is still recovering.

[ image: A weak yen helps Japanese exporters]
A weak yen helps Japanese exporters
Dealers say the Bank of Japan could have bought as much as 5bn worth of US dollars on Monday.

The dollar, which dipped below 118 yen in early Asian trade, was forced higher to above 120 yen by repeated intervention.

Eisuke Sakakibara, Japan's vice finance minister for international affairs, confirmed that the Bank of Japan had stepped into foreign exchange markets to stem the rising yen but declined to confirm at what level.

He said: "We will continue to monitor moves on foreign exchange markets and take appropriate measures if necessary."

Protecting fragile economy

Peter Morgan, Chief Economist, HSBC Securities Japan said: "Well I think the key point is that the Japanese economy is not as strong as the numbers suggest.

"I mean 8% is certainly not the underlying growth rate at this point.

"I think it's basically flat at best. So that in those sorts of conditions a significant yen appreciation is going to have a negative impact and would tend to prevent the recovery from taking hold.

"So I think it's probably a good thing to try and keep the yen from going up too much."

Nikkei down

The yen has been rising against the dollar since the government announced last week that Japan's gross domestic product grew a robust 1.9% in the first quarter of the year.

In stock trading, the benchmark Nikkei stock index edged down 9.73 points to close on Monday at 17,188.82 after a late bout of profit taking.

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